Acetone is used in two main applications: the manufacture of methyl methacrylate (MMA) and bisphenol A (BPA). Acetone also goes into solvent applications largely used in pharmaceuticals manufacturing and is used to make a number of chemical intermediates, such as methyl isobutyl ketone (MIBK), isophorone and diacetone alcohol/hexylene glycol.
China, which has just over 1m tonnes/year of domestic acetone capacity at the end of 2013, remains the world’s largest buyer of acetone. China in 2013 purchased 488,700 tonnes of acetone from abroad, chiefly from Taiwan, South Korea, Thailand and Europe.
Until 2011, China’s apparent consumption of acetone maintained high growth rates, driven mainly by expansion in the downstream BPA and isopropyl alcohol sectors. However, the pace of demand growth slowed in 2012 and 2013 because of decelerating economic growth in China and weak economic conditions in the eurozone and the US. At the same time, domestic capacity expansion is reducing China’s reliance on acetone imports.
In 2012 and 2013, a weak performance in the primary product phenol sector capped regional phenol/acetone plant run rates at 80-85%, constraining the supply of byproduct acetone and keeping regional markets in balance.
However, as phenol/acetone capacity addition is expected to outpace demand growth in Asia, an anticipated further worsening in regional supply-demand fundamentals has spurred industry rationalisation. Japan’s Mitsui Chemicals announced in February 2014 that it will permanently close the largest of its three phenol/acetone plants in Japan in September 2014 because of deteriorating profitability caused by a growing phenol supply overhang.
Spot acetone prices into China, the world’s largest market, largely rose in the second half of 2013 before hitting a record high of $1,250/tonne CFR China in December 2013. Prices rose on the back of gains in the feedstock benzene and propylene sectors and lower regional acetone output owing to a weak performance in the primary product phenol market.
In the last quarter of 2013, strong demand from derivatives sectors, such as concrete water reducers, prevented Chinese producers and importers from building up their inventories, causing domestic prices to spike above yuan (CNY) 10,000/tonne.
However, acetone prices dropped below $1,200/tonne CFR China by early March 2014, weighed on by a post-Lunar New Year holiday build-up in inventories and the slower-than-expected recovery from some downstream sectors. A late-February sell-off in the broader petrochemical market, tightening supply of credit and an unexpected yuan depreciation contributed to the decline in acetone prices.
Nearly 90% of acetone is produced from cumene, which itself is made by the reaction of propylene and benzene in a phosphoric acid-based or zeolite catalyst. From cumene comes phenol and acetone. Approximately 0.62 tonnes of acetone is produced with each tonne of phenol made.
Acetone import demand into China is expected to continue falling in 2014 as the country’s self-sufficiency is boosted by capacity expansion and new plant start-ups. Following a 29% year-on-year slump in its import volume in 2013, this year may see a further 18% fall in the country’s import volume to around 400,000 tonnes, according to forecasts by Chemease, an ICIS service in China.
Three new plants with combined acetone capacities of 480,000 tonnes/year are scheduled to be started up in the second half of 2014 in China. These include: Shanghai Sinopec Mitsui Chemicals’ plant in Shanghai, Formosa Chemicals & Fibre Corp (FCFC)’s plant at Ningbo and Spanish producer Cepsa’s plant in Shanghai. Existing Chinese producer Sinopec Beijing Yanshan is planning to expand its acetone capacity by 75,000 tonnes/year, while Kingboard Chemical is aiming for a 45,000 tonne/year expansion at its Huizhou plant.
As China’s import reliance continues to fall, some of the excess volumes are likely to be directed to markets such as India and the US.